Three Dividend ETFs Outside the S&P 500 That Are Beating It and Paying Up to 3.4 Percent

Dividend-focused ETFs can extend income beyond S&P 500 mega-cap holdings that often emphasize buybacks. Mid-cap and small-cap dividend payers tend to be mature businesses with steadier payout ratios and less buyback dilution. They also trade at lower valuation multiples, which can support higher yields for comparable dividend levels. A volatility-weighted large-cap approach can further reduce exposure to the largest mega-cap names and create a different income mix than cap-weighted benchmarks. Three funds—WisdomTree U.S. MidCap Dividend Fund, WisdomTree U.S. SmallCap Dividend Fund, and VictoryShares US Large Cap High Div Volatility Wtd ETF—show stronger year-to-date performance than the SPDR S&P 500 ETF Trust, with CDL also offering about a 3.4% trailing yield. DON’s weighting emphasizes the dollar amount of dividends paid rather than market capitalization.

"Most dividend ETF conversations start and end with the S&P 500. That is fine if you already own Schwab U.S. Dividend Equity ETF or Vanguard Dividend Appreciation ETF and want one more large-cap variant. It is limiting if you are trying to build an income stream from companies the large-cap dividend crowd never touches. Three funds widen that aperture: WisdomTree U.S. MidCap Dividend Fund ( NYSEARCA:DON | DON Price Prediction), WisdomTree U.S. SmallCap Dividend Fund ( NYSEARCA:DES), and VictoryShares US Large Cap High Div Volatility Wtd ETF ( NYSEARCA:CDL)."

"Two of the three are outpacing the S&P 500 outright this year. The SPDR S&P 500 ETF Trust is up 8% year to date, while DES has returned 14% and CDL has returned 11%. The third, DON, is up 6% and trailing slightly, but it earns its spot for a different reason explained below. CDL is also the yield leader, distributing roughly 3.4% on a trailing basis."

"The S&P 500's dividend yield is anchored by a handful of mega caps that prioritize buybacks. Mid-cap and small-cap dividend payers are usually mature businesses with steadier payout ratios and less buyback dilution math to manage. They also trade at lower multiples, so a similar payout funds a higher yield. And a volatility-weighted screen on large caps deliberately demotes the heaviest mega-cap names, producing an income mix that looks nothing like the cap-weighted benchmark. Each of these three funds takes one of those routes."

"DON tracks the WisdomTree U.S. MidCap Dividend Index, a rules-based universe of mid-cap U.S. companies that pay regular cash dividends. The hook is the weighting method: instead of market cap, holdings are weighted by the dollar amount of dividends each company pays. A mid cap distributing $400 million annually gets more weight than one distributing $100 million, even if their market caps are similar. The mechanism connecting this"

Read at 24/7 Wall St.